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M u c h a w a i t e d s t a k e s a l e …
Reliance Life Insurance has entered into a definitive agreement to sell its
26% stake to Nippon Life Insurance. Reliance Life will receive | 3062 crore
($680 million), the largest FDI in Indian financial services sector. Nippon
Life is a 121-year old Global Fortune 100 company, sixth largest life
insurer globally and the No. 1 private life insurer. The deal is subject to
regulatory approvals, which may take anywhere between 3-6 months.
Deal done at premium valuations…
We believe the valuation factors in 17x FY12E new business achieved
profit (NBAP) of | 640 crore. This is slightly on the higher side in the
current environment of slow growth in the life insurance business in India
with margins gradually moving southwards. However, as this is the first
stake sale by Reliance Life and the Japanese company is getting new
entry into the Indian markets, the premium is justified.
The majority of the sale will be secondary sale and marginal primary sale.
Hence Reliance Capital will take a substantial portion of the capital gains
on its books. The management has not disclosed any information on the
break-up. However, we can sense the gains as Reliance Capital has, till
now, invested approximately | 3000 crore till date for the entire business
of Reliance Life and the current 26% stake was sold for | 3062 crore.
V a l u a t i o n
Fresh capital will boost various businesses under Reliance Capital like
consumer finance, general insurance and life insurance also. Considering
the flattish growth in new business premiums for FY11E and 15% in
FY12E, we have arrived at APE of | 4241 crore for FY12E. We have valued
the entire life business at 15x FY12E NBAP and not at the premium stake
sale value of $2.6 billion. Assigning | 388 per share for Reliance Life, we
revise our SOTP target to | 631 from | 540 earlier and rate the stock as
BUY.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
M u c h a w a i t e d s t a k e s a l e …
Reliance Life Insurance has entered into a definitive agreement to sell its
26% stake to Nippon Life Insurance. Reliance Life will receive | 3062 crore
($680 million), the largest FDI in Indian financial services sector. Nippon
Life is a 121-year old Global Fortune 100 company, sixth largest life
insurer globally and the No. 1 private life insurer. The deal is subject to
regulatory approvals, which may take anywhere between 3-6 months.
Deal done at premium valuations…
We believe the valuation factors in 17x FY12E new business achieved
profit (NBAP) of | 640 crore. This is slightly on the higher side in the
current environment of slow growth in the life insurance business in India
with margins gradually moving southwards. However, as this is the first
stake sale by Reliance Life and the Japanese company is getting new
entry into the Indian markets, the premium is justified.
The majority of the sale will be secondary sale and marginal primary sale.
Hence Reliance Capital will take a substantial portion of the capital gains
on its books. The management has not disclosed any information on the
break-up. However, we can sense the gains as Reliance Capital has, till
now, invested approximately | 3000 crore till date for the entire business
of Reliance Life and the current 26% stake was sold for | 3062 crore.
V a l u a t i o n
Fresh capital will boost various businesses under Reliance Capital like
consumer finance, general insurance and life insurance also. Considering
the flattish growth in new business premiums for FY11E and 15% in
FY12E, we have arrived at APE of | 4241 crore for FY12E. We have valued
the entire life business at 15x FY12E NBAP and not at the premium stake
sale value of $2.6 billion. Assigning | 388 per share for Reliance Life, we
revise our SOTP target to | 631 from | 540 earlier and rate the stock as
BUY.
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